Industrial Organisation and Bounded Rationality

Abstract

In this chapter we turn from investigating the general features of firm, market and state organisation to consideration of the implications of bounded rationality for one major field of economics; industrial organisation. We shall suggest that the interesting, non-trivial problems in this area derive directly from bounded rationality influences and we shall conclude that theoretical approaches in industrial organisation must build directly on this concept if they are to have any hope of empirical relevance. While concern here is limited to the field of industrial organisation, it would be extremely surprising if similar argument could not be developed against neoclassical theory in consumer theory also.

During the incessant struggle of all species to increase in numbers, the more diversified the descendents become, the better will be their chance of success in the battle for life.

Charles Darwin, The Origin of Species